Fiscal cliff deal still faces many hurdles

House Speaker John Boehner jump-started the budget talks by offering to raise tax rates, but major differences on entitlements and revenue could prove difficult to bridge with only two weeks until the fiscal cliff deadline.

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Fiscal cliff: A primer

The Ohio Republican’s concession to boost marginal tax rates on income over $1 million — and his request for $1 trillion in spending cuts and a hike in the Medicare eligibility age — show simultaneously the peril and promise of the still unfolding budget negotiations between Congress and the White House.

Boehner is moving toward Obama’s position on tax rates, but the speaker’s offer is still nowhere close to what the president or Democratic leaders on Capitol Hill can ultimately accept. The two sides also remain far apart on the extent and source of cuts to entitlement programs.

The Ohio Republican purportedly tried to sweeten the proposal with an offer to delay a fight over the U.S. debt limit for another year, multiple news outlets reported Sunday night. Such a move would postpone another major budgetary and political battle looming early next year.

But Boehner aides pushed back on the media reports on the debt-limit delay, calling them “highly misleading.”

Boehner’s latest offer, made in a call to Obama on Friday, entails roughly $440 billion in new revenue over the next decade by allowing tax rates to increase to 39.6 percent on $1 million-plus annual incomes. A further $500 billion would come from tax reform implemented by Congress next year, including limiting deductions for the wealthy and closing loopholes. An additional $60 billion would come from a change in how entitlement benefits are calculated.

But proposed cuts to Medicare are now the key to any fiscal cliff deal. Boehner needs robust changes to the hugely popular seniors health program to sell any kind of tax-rate increase to his conservative-dominated Republican Conference. Yet top Democrats in both the House and Senate have said that increasing the Medicare eligibility age from 65 to 67 simply isn’t an option. Given that mounting Democratic opposition, Obama may need tax rates on families with annual income over $250,000 to increase to 39.6 percent before he could make Medicare changes that cut deeply into benefits.

It’s now crunch time in the negotiations to avert the fiscal cliff, and bridging issues like these will define the next 15 days. There are several dynamics at play as Obama and Boehner look for an agreement to avert a tax increase on all Americans and across-the-board spending cuts to government programs.

Tweaks to the offer

Boehner’s offer to Obama was just that — an offer. The White House rejected Boehner’s $1 trillion proposal because the revenue target was still too low and the entitlement changes cut too deep. Obama has sought $1.4 trillion in new revenue. The two sides aren’t close to a deal yet, although there are signs of progress, sources said.

But if Boehner is willing to hike taxes on income over $500,000, he’s likely to get more concessions on entitlements from Obama. Of course, the opposite is true, as well. The speaker has indicated he’s willing to raise taxes; now, it’s Obama’s turn to make a big offer on entitlements.

The White House and Boehner aides say, “The lines of communication remain open.”

Readers' Comments (28)

Obama has had four long years to fix and avoid his fiscal cliff problem. Now Obama is avoiding his mental Illness problem. Why did Obama cancel mental health research and the funding for school security in 2010?

AngelEyz you have no clue what you are talking about. The fiscal cliff only came about last year in a deal that Republicans and Democrats made in order to raise the debt limit. This was a Senate Republican idea that the President signed off on.

Republicans have been the party trying to kill ACA (Obamacare) which contains increased coverage and funding for mental health programs. So apparently you either did not know that or are trying place blame for this tragedy on the President. What a Piece of Work

Classy comment, AngelEyez. I suppose you hold Obama somehow responsible for what happened on Friday, not the disturbed individual with the gun or the weak gun laws (which you probably support) that help allow these incidents to happen in the first place.

The fiscal cliff is entirely 100% the fault of House Republicans, who decided to take the debt ceiling as a political hostage even though it had been previously raised for all other presidents without drama. The downgrade to America's credit rating is 100% the fault of House Republicans, who were specifically called out in the press statement from the rating agency when they explained why they had taken the action.

Funding for mental health research and school security were cut by, you guessed it, House Republicans. We all recognize that you hate, hate, hate President Obama with the burning passion of a thousand suns, and that blinds you to any reasonable or constructive thought, conversation, or course of action.

It's a shame that this affliction (which is generally shared by all Republicans in the House and Senate) has done such astounding damage to the country.

Anyway, to get back to the topic of the article: I fully anticipate that the country will go off the "cliff," as I do not anticipate that Republicans will be willing to make any sort of constructive offer (or any offer at all) until we are well past the deadline date.

It should be noted that the "offer" mentioned in the article is the exact same "offer" that Speaker Boehner has put forward all along: although he has made several stabs at variations of wording, the baseline proposals have not differed at all. The proposal from the Republican side is still:

* Tax cuts for the wealthy, paid for by:

* Tax increases on the rest of the country in combination with:

* Massive entitlement cuts designed to hurt "the poor"

I should also point out here that some very big-money proposals (for example, allowing Medicare to negotiate its drug costs, allowing drugs to be imported from Canada, and the like) that the Democrats have made - and which would be projected to save major amounts of moolah - are not considered to be "serious" proposals by the Republicans.

As far as I can tell, the current House Republicans only consider a Democratic proposal to be "serious" if it:

* Benefits the very wealthiest or

* Hurts the people they consider to be "Parasites."

I am out of the house for the rest of the evening, so this will probably be my last response: I will come back tomorrow and see where the conversation went.

At the end of the day these two politicians are going to do what politicians have always done...find a way of giving each side a way of saying they have a victory, at the expence of the American people.

Obama's increase of the marginal tax rates, even to 39.6%, only raises about one quarter of the $1.6tn in taxes Obama is seeking...any guesses who will be paying the balance?

Interesting how it's only the Republicans who are willing to give ground to solve this. Obama refuses all concessions. As usual, it's his way or the highway. But when negotiations fail, he'll be crying about a lack of bipartisanship. Will someone let this dodo know that bipartisanship and negotiation require flexibility from both sides?

"But if Boehner is willing to hike taxes on income over $500,000, he’s likely to get more concessions on entitlements from Obama."

The fact that anyone can make this statement with a straight face shows how pathetically out of touch they are with the fundamental founding principles of this country. Nobody has the right to simply decide that the earnings of "high earners" are theirs to confiscate and divvy up as they see fit.

So Obama is not happy with 4 days worth of spending, he wants 8? Because that's what the "revenue" that he's talking about provides. In other words, this has nothing to do with reducing the deficit, it's an ideological battle to strip income from people who have worked hard to get it, so that it can be distributed to those who don't work at all.

John Boehner continues to embarrass himself and the Republican Party. He offers a tax hike on only those making over a million dollars a year (though he and his fellow Republicans really believe that even those who make over $300 million a year would be grievously hurt by a small tax hike). I believe John Boehner makes enough money that a tax hike wouldn't hurt him at $223,500 per year. Nor would a tax hike on all other members of Congress at $174,000 a year (not counting countless perks). You're going the wrong way, John, if you're interested in paying down deficits. And in the process, every negotiated step of the way, you remind voters you represent the rich only and are in no serious way concerned about deficits. You still want us to borrow money to pay for tax cuts for millionaires and billionaires. Why aren't Republicans pushing to extend the payroll tax cuts? They say they're against any rise in any tax rate, but they only squawk about tax hikes on the rich. Tax hikes on the masses of Americans, well, that's not so bad. Same thing with raising the eligibility age for Medicare recipients; Republicans like it not because it saves us a huge amount of money -- it doesn't -- but because it's poking most Americans in the eye with a stick. Republicans perversely love doing that.

I find it funny all the Obama haters here who list their party as N/A is that short for NO AMMUNITION and I also find it funny that Mr Boehner is willing to accept tax raises on those making more than a million because he only made made 500,000 last year and would have to pay more in taxes like $12500 does he not understand that the taxes are going up in 13 days anyhow no matter what he is willing to give up. If the house of representative is all about doing what is good for this country then they should vote 435-0 not to have the taxes go up for those making $250,000 and less which is only 5000 per week how many of are doing that?

I am amazed that so many intelligent American people suddenly cannot seem to recall that the idea to set up this "fiscal cliff" came from the Republicans in the Senate. Senate Republicans refused to go along with any TEMPORARY increase in the national debt ceiling unless President Obama and the Democrats agreed to the enormous spending cuts.

The Senate Republicans were threatening a filibuster (as usual); so President Obama and the Senate Democrats caved in and allowed this automatic tax hike and huge spending cuts,which were set up as PERCENTAGES of the line items in te budget. Translation: Most cuts come out of the defense budget because that is where most current expenses are.

Republicans never thought for a minute that President Obama and Democrats would allow automatic tax increases to go into effect because the middle class will get hammered too; however, the middle class now wants to see everyone in the top tax bracket (now at 35%) have to go back to 39.6% where it was during the Clinton years. The middle class does not care because they never get to the top tax brackets anyway; it is the top 1% earning many millions who are screaming about having to pay another 4.6% in income taxes.

Response to an Independent poster named Roameo who said this: (at post #14):

"Why aren't Republicans pushing to extend the payroll tax cuts? They say they're against any rise in any tax rate, but they only squawk about tax hikes on the rich. Tax hikes on the masses of Americans, well, that's not so bad."

Response: The wealthy do not care about FICA payroll taxes because they are cheap (7.65% for individuals and another 7.65% for employers), and because they cap out at about $120,000 anyway. FICA taxes are too cheap for Republicans to worry about, so they never even think about reducing them for the over-taxed middleclass.

"Same thing with raising the eligibility age for Medicare recipients; Republicans like it not because it saves us a huge amount of money -- it doesn't -- but because it's poking most Americans in the eye with a stick. Republicans perversely love doing that."

Response: The stick-poking comment is priceless--- and it describes the un-caring Republicans perfectly. As to increasing the age for Medicare. most uber-wealthy Republicans who I know do not care about Medicare because that have always carried gold-plated private medical insurance policies on themselves. Why? Because they do not want to be treated by the same bunch of younger doctors who treat regular Americans under Medicare and Medicade. Uber-wealthy Republicans also know that the (enormous) premiums they have to pay for gold plated health insurance are nearly 100% tax deductible, which in the end means that 35% of the expense for their private health insurance plans gets paid by the American taxpayers anyway.

My comment is in response to kishke. Well you are wrong there. The Repubs have not made any serious offers on revenue so far (there just are not that many people who make over one million dollars a year, but there are a hell of a lot more that make over 250 thousand a year). Frankly, I do not believe they will budge on increasing tax rates on the wealthy, one of their three primary constituencies (the other two are the religious right and the NRA). It appears that going over the cliff will probably be the best solution.

Repubicans should just p-ack up and go home. Uneducated voters will blame them anyway and once again Obama is abandoning deficit reduction nd jobs. The voters voted for their wn destruction. Let them have it.

Repubicans should just p-ack up and go home. Uneducated voters will blame them anyway and once again Obama is abandoning deficit reduction nd jobs. The voters voted for their wn destruction. Let them have it.